In an effort to address the swelling trade deficit, the Indian government has recently introduced import restrictions on specific gold jewellery and related items. The Directorate General of Foreign Trade (DGFT) has issued a notification stating that importers must obtain government permission or a license to import these gold products.
The trade gap reached a five-month high in May, mainly due to a 10% decline in exports caused by sluggish demand from Western countries. However, it's worth noting that the restrictions will not be applied to imports covered by the India-UAE free trade agreement.
During the fiscal period of April-May, imports of pearls, precious stones, and semi-precious stones decreased by 25.36% to approximately USD 4 billion. Similarly, gold imports contracted by about 40%, amounting to USD 4.7 billion in the same period.
Overall, merchandise imports for April-May this fiscal year declined by 10.24% to USD 107 billion. Consequently, the merchandise trade deficit stood at USD 37.26 billion during April-May 2023, compared to USD 40.48 billion in the previous year's corresponding period.
As of now, the Ministry of Commerce and Industry has not provided an immediate response to requests for comment regarding this development.
This action was prompted by certain importers exploiting a policy loophole to obtain plain gold jewellery from Indonesia without paying any import taxes. The government aims to rectify this issue by implementing these new restrictions.
By implementing these measures, the Indian government seeks to better regulate the importation of plain gold jewellery and mitigate the negative impact on the trade deficit.
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